Health care costs increasing

Obamacare’s Neglect of the Middle Class

Obamacare by from The Weekly Standard, February 9, 2015

Liberal writers’ response to the Burr-Hatch-Upton alternative makes one wonder whether they really understand how Obamacare works.

The Huffington Post’s Jeffrey Young and Jonathan Cohn declare that “putting together a real Obamacare alternative will take more time — and more genuine interest — than Republicans have.”  In truth, such Obamacare alternatives are already available to Republicans.  These include the 2017 Project’s “Winning Alternative to Obamacare,” which helped Ed Gillespie almost pull off a huge upset victory in last year’s Virginia Senate race, and the newly released Burr-Hatch-Upton alternative, an updated version of last year’s Burr-Coburn-Hatch proposal.

Young and Cohn criticize the Burr-Hatch-Upton proposal (advanced by Senators Orrin Hatch and Richard Burr and House Energy and Commerce Committee chairman Fred Upton) in a variety of ways, but I want to focus on just one.  Echoing other liberal writers, they assert, “Relative to Obamacare, the Republican proposal would provide financial assistance to fewer people and cut off aid at a lower income level.”  While this critique highlights a political downside to offering income-tested tax credits — rather than offering tax credits to everyone in the individual market and thereby fixing the longstanding inequality in the tax code (between employer-based and individual-market insurance) — Young and Cohn aren’t painting an accurate picture.  In fact, their statement makes one wonder whether they really understand how Obamacare works.

Young and Cohn’s assertion is based on the false perception, widely perpetuated on both the left and right, that Obamacare provides subsidies to everyone whose income is less than 400 percent of the poverty level.  But that’s merely the ceiling beyond which one absolutely cannot get an Obamacare subsidy.  In truth, Obamacare’s subsidies are as byzantine as one would expect from a 2,700-page effort to take over American medicine.  They are different in each of the 3,000 or so counties in the United States.  So, where you live, as well as each dollar of your income and each year of your age, alters your subsidy.  The subsidies are also altered each time one of President Obama’s insurance company allies offers a new policy that becomes the new lowest-cost or 2nd-lowest-cost “silver plan” in a given county, as the subsidy formula is based on the price of each county’s 2nd-lowest-cost “silver plan.”  (Who says Obamacare is complicated?)

The upshot of all this is that, far from going to everyone who makes less than 400 percent of the poverty level (liberals like to speak in terms of percentages of poverty), Obamacare’s subsidies go almost entirely to the near-poor and near-elderly, while neglecting the middle class and the young.

The 2017 Project completed a comprehensive study of Obamacare’s subsidies for 2014 and found that, based on America’s 50 largest counties (composing about 30 percent of the U.S. population), the typical 40-year-old (or younger) person making $35,000 a year (or more) got $0 in Obamacare subsidies.  That’s even though $35,000 is less than 300 percent of the official poverty level.

Fairfax County, Virginia was near the middle of the pack in that study.  It’s also the largest county in the nation’s most down-the-middle state, so let’s use it to examine Young and Cohn’s claim in the context of 2015 — their claim that, versus Obamacare, Burr-Hatch-Upton “would provide financial assistance to fewer people and cut off aid at a lower income level.”

This year, a 31-year-old single Fairfax County woman with no children and an income of $33,500 a year (287 percent of the poverty level) gets $0 in Obamacare subsidies.  She’s too young and too middle class.  Under Burr-Hatch-Upton (assuming a linear phase-out of their tax credit), she would get a $255 tax credit.  Except perhaps in rare cases, that $255 tax credit would come entirely in the form of a tax cut.  (In contrast, Obamacare doesn’t cut anyone’s taxes; it just sends taxpayer-funded subsidies directly to insurance companies.)  And because Burr-Hatch-Upton would repeal Obamacare’s mandates that seek to corral everyone into the sort of prepaid health plans (pediatric dental care for all!) that Obama prefers, this woman could use that tax cut to buy genuine insurance — probably low-premium (“catastrophic”) coverage with a wider doctor network — of her choice.

Let’s take another example.  A Fairfax County family of five with 51-year-old parents and an income of $28,000 a year gets a whopping $14,354 in Obamacare premium subsidies, plus further lavish subsidies for out-of-pocket costs.  That family would get a tax credit under Burr-Hatch-Upton, in the amount of $11,110 — again, to use to buy insurance of their own choice on the open market, rather than Obamacare-compliant insurance through a government-run exchange.

But if that family’s income were to dip just a bit, say to $27,500, then their Obamacare subsidy would become — amazingly — $0.  The kids would get dumped into Medicaid, while the parents would get nothing.  Under Burr-Hatch-Upton, that family would get the same $11,110 that they would have gotten if their income had remained $500 higher.  (Under Obamacare, do you think these folks might have a strong incentive to cheat on their taxes by making up an additional $500 in freelance income?)

Thus, while Young and Cohn claim that, versus Obamacare, Burr-Hatch-Upton would “provide financial assistance to fewer people and cut off aid at a lower income level,” in many cases — such as in the examples highlighted above — it would provide a tax credit to those who either make too much or too little to get an Obamacare subsidy.

In truth, Obamacare helps only a very small portion of the population at great cost to millions of people.  (That “cost” is not only monetary — it’s also in liberty and in the quality of care.)  According to the Congressional Budget Office’s latest scoring, for calendar-year 2015, Obamacare’s net increase in the number of people with private health insurance will be 7 million (12 million through its exchanges minus 5 million who lost their prior coverage).  That’s just 2 percent of the U.S. population of more than 300 million — and some portion of those 2 percent only bought Obamacare-compliant insurance because Obama and his Democratic allies compelled them to do so by law.  The other 11 million people (according to the CBO) who will be “covered” under Obamacare — 3 percent of the population — are simply being dumped into a broken Medicaid program at taxpayer expense.  What’s more (again according to the CBO), 36 million people will remain uninsured.

It is no wonder, therefore, that Americans want repeal — and that in the context of an alternative that focuses on both costs and coverage, they favor repeal by a tally of 60 to 32 percent.

Jeffrey H. Anderson is executive director of the 2017 Project, which is working to advance a conservative reform agenda (including “A Winning Alternative to Obamacare”) to re-limit government, secure liberty, and promote prosperity.

© 2015 Weekly Standard LLC. Reprinted with permission.